The NY Times Is Misleading. And Who Is Correct? Eurostat or China Customs?

Data published this month showed that China’s exports to the European Union hadsunk 16.2 percentin July to $29.4 billion, compared with July 2011.

This statistic (bolded by yours truly) is misleading.

First, China Customs measures exports in nominal dollars. If you look at Chinese exports measured in, let’s say euros, it doesn’t look quite as bad. In July, exports to the European Union (EU 27) dropped -3.6% over the year measured in euros versus a -16.2% annual decline measured in dollars. The dollar appreciated against the euro over the measurement period so the drop in China’s exports to the EU 27 is much lower in euros.

Note: This is only an approximation since I use the average monthly exchange rate, which is unlikely to align perfectly with China Customs’ measurement period.

An interesting corollary to the FX impact on ‘value’ statistics is the various statistical agencies that report presumably the same statistic. Eurostat publishes import data by partner and in euros. Using the average exchange rate over the month, I calculate the value of EU 27 imports from China reported in dollars for comparison to the China Customs data. Eurostat data is available only through June.

In June, Eurostat reports that EU 27 imports from China dropped -11.1% measured in dollars compared to the reported -1.1% annual reduction in exports from China to the EU 27 by China Customs. Clearly the trend is downward; but the Eurostat data only loosely matches the China Customs data. Balance of payments statistics are subject to large “errors and omissions”.

Note: In the chart below, Eurostat data is illustrated in the series “EU imports from China”, while China Customs data is illustrated in the series “Exports to EU”.

So who’s right? Eurostat or China Customs? Part of the differentiation involves the timing of the FX moves (remember I use the monthly averages); but that is unlikely the full story here. I’d err on the side of Eurostat, and notice the trend looks pretty bad no matter who’s estimating the trade data.